Home prices hit fresh record high, pushing sales down for fourth straight month in June

By Aarthi Swaminathan

'We're seeing a slow shift from a seller's market to a buyer's market,' industry group says

The numbers: Existing home sales fell for the fourth month in a row in June as record-high home prices and 7% mortgage rates weighed on buyers.

Sales of previously owned homes fell 5.4% to an annual rate of 3.89 million in June, the National Association of Realtors said Tuesday. That's the lowest level since December 2023.

That's the number of homes that would be sold over an entire year if sales took place at the same rate in every month as they did in June. The numbers are seasonally adjusted.

It is the slowest pace of home sales in any June since 1999, when the NAR began tracking the data.

The pace of sales fell short of expectations on Wall Street, which was forecasting a 3.95 million pace for June.

Compared with June 2023, home sales were down 5.4%.

Key details: The median price of an existing home in June rose 4.1% as compared with the year before, to $426,900, an all-time high.

Unsold inventory rose to the highest level in four years.

Nearly 30% of properties were sold above list price, the NAR said, with homes receiving an average of 2.9 offers.

Sales of million-dollar-plus homes saw an uptick in June, the only increase among all price categories. Nationwide, sales of homes priced over $1 million rose 3.6% in June as compared with a year ago.

The total number of homes listed on the market in June rose 3.1% from last year, to 1.32 million units. There is a 4.1-month supply of unsold inventory, which is the highest level since May 2020.

Listed homes remained on the market for 22 days on average, down from 24 days in the previous month.

Sales of existing homes fell across the country in June, with the Midwest posting the biggest drop.

All-cash buyers made up 28% of sales. The share of individual investors or second-home buyers was 16%.

About 29% of homes were sold to first-time home buyers.

Big picture: It's been a tough summer for the real-estate industry, as buyers pull back on purchases due to record-high home prices and elevated mortgage rates. That's in spite of the fact that there are more homes on the market today than a year ago.

The months ahead could be less gloomy. In July, mortgage rates fell on the back of expectations of an interest-rate cut by the Federal Reserve, which could bring some rate-sensitive buyers back into the market.

See also: Mortgage rates just dropped to a four-month low. Should you buy a house now - or wait?

What are they saying? "The collapse in sales largely reflects the jump in mortgage rates to 7.2% in April, from 6.9%, and is something we had anticipated given that pending home sales and mortgage applications, which lead transactions by a month or two, both slumped in April and May," Thomas Ryan, an economist focused on North America at Capital Economics, wrote in a note.

"Unlike in November last year, this historically weak sales number comes at a time when supply (i.e. the number of homes on the market) is rising, albeit still extremely tight. This suggests that the steep decline in sales was driven primarily by pullback in buyer demand, whereas previously a fall in the numbers of sellers because of mortgage 'lock-in' seemed to play an equally large role," he added.

"There is more inventory out there to choose from now, but a big difference is that home prices in most markets are higher than they were a year ago and more prospective homebuyers are simply priced out," Lisa Sturtevant, chief economist at Bright MLS, said in a statement.

"Another difference this year is the anticipation of lower mortgage rates in the months ahead. Some prospective buyers are simply waiting for mortgage rates to come down after the Federal Reserve cuts rates, most likely in September," she added.

What the NAR said: "We're seeing a slow shift from a seller's market to a buyer's market," Lawrence Yun, chief economist at the NAR, said in a statement.

"Homes are sitting on the market a bit longer, and sellers are receiving fewer offers," he added. "More buyers are insisting on home inspections and appraisals, and inventory is definitively rising on a national basis."

On a call with reporters, Yun also said the industry group was "carefully" monitoring upcoming changes to the way real-estate agents work with home buyers, which will go into effect on August 17.

The changes are part of a settlement agreement that stemmed from legal action against the group, and they require several changes, including requiring compensation disclosures to home sellers and home buyers.

Market reaction: Real-estate brokerage stocks such as Compass (COMP), Redfin (RDFN) and Zillow (Z) were up in early trading on Tuesday. The yield on the 10-year note BX:TMUBMUSD10Y was under 4.3%.

-Aarthi Swaminathan

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07-23-24 1101ET

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